Teachers Want Books Checked at Pension Fund
TRS internal investigation isn't credible, union president says
When Democratic governor hopeful Bill White produced a "smoking gun memo" alleging impropriety and bad investment practices at the state agency that handles $102.4 billion in teacher pension funds, it was initially written off as campaign theatrics. Now deeper and more worrisome questions are being raised about whether mismanagement under Gov. Rick Perry has left the fund with a gaping hole. And this week, the president of the union that represents Texas teachers called for a serious review of the allegations laid out in the memo.
The White campaign first brought attention to the Teacher Retirement System's questionable practices on Oct. 19, when it released a 2009 internal memo from Michael Green, director of private markets in TRS' investment division, to TRS board chair Linus Wright. In the memo, Green alleged that Chief Investment Officer Britt Harris was being "manipulated by Board members and investment managers to the detriment of TRS' beneficiaries." White's campaign alleged that, while current Perry campaign finance committee chair James Lee served as TRS chairman, staff was pressured to award contracts to firms owned by Perry donors.
The smoke seemed to clear briefly when the agency released a report on the matter by former Securities and Exchange Commissioner Roel Campos. Furthermore, the Travis County District Attorney's Office found no criminal malfeasance, so that seemed to be the end of it.
But that diagnosis wasn't exactly an all-clear. In his report, Campos said there was evidence of "inadvertent" violations of the Trustee Ethics Policy and recommended revising the rules for interaction between trustees and staff. Tim Lee, executive director of the Texas Retired Teachers Association, added that "the management issues need to be reviewed thoroughly."
However, even that mild criticism has only served to stir up deeper questions, like why TRS hired Campos in 2009 when Attorney General Greg Abbott blocked his contract as TRS ethics officer in 2008 or why Green has been on paid leave since Dec. 31, 2009. It also dredges up old questions about James Lee's reforms at TRS, like his 2008 grilling by members of the Senate Finance and State Affairs committees over the board's decision to dump its ethics-advising fiduciary counsel in favor of a new firm with no public pension fund experience. There's the even bigger question of how the fund has gone from having enough reserves in 2000 to provide pensions to the state's 1.2 million retired teachers for 30 years to a $21.6 billion unfunded liability in 2009.
On Oct. 25, Linda Bridges, president of teachers' union Texas AFT, called for a fresh investigation of Green's allegations. "We aren't convinced the TRS internal investigation is credible," she said. She also questioned why Perry rejected House Bill 2656, a Republican-authored bill adding one more retired teacher to the TRS board. The bill passed unanimously in both the House and Senate in 2009, but Perry vetoed it, calling the restructuring away from his handpicked financial experts "an inappropriate adjustment in these uncertain economic times." Bridges replied, "The expertise Perry cites seems to be the ability to respond to political pressure and requests for favors."